{"id":1250,"date":"2018-04-30T10:23:34","date_gmt":"2018-04-30T14:23:34","guid":{"rendered":"http:\/\/naroffeconomics.com\/?p=1250"},"modified":"2018-04-30T10:23:34","modified_gmt":"2018-04-30T14:23:34","slug":"march-personal-income-spending-and-pending-home-sales","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1250","title":{"rendered":"March Personal Income, Spending and Pending Home Sales"},"content":{"rendered":"

KEY DATA:<\/u><\/strong> Disposable Income: +0.3%; Wages: +0.2%; Consumption: +0. 4%; Prices (Over-Year): +2.0%; Excluding Food and Energy (Over-Year): +1.9%\/ Pending Sales: +0.4%<\/p>\n

IN A NUTSHELL:<\/u><\/strong> \u00e2\u20ac\u0153Inflation is at the Fed\u00e2\u20ac\u2122s target level and it is likely the 2% rate will remain in the rear view mirror for quite some time.\u00e2\u20ac\u009d<\/em><\/strong><\/p>\n

WHAT IT MEANS:<\/u><\/strong> With the battle between interest rates and earnings raging on, the crucial economic numbers are those that tell us about inflation pressures. Today, we saw that the Fed\u00e2\u20ac\u2122s preferred measure of consumer costs, the Personal Consumption Expenditure price index may have been flat between February and March, but it rose by 2% over the year.<\/em><\/strong> Energy costs are up since March and the Chicago Purchasing Managers report that their prices paid neared a seven-year high in April. We could have a big increase in the April index. Even excluding food and energy, prices are also rising pretty much at the Fed\u00e2\u20ac\u2122s target pace.<\/p>\n

How much inflation accelerates depends upon the willingness and ability of consumers and businesses to spend. <\/em><\/strong> We have yet to see the capital investment boom, but that may come in the second half of the year. As for households, the key is income growth and the March report didn\u00e2\u20ac\u2122t tell me that there was a huge increase in spending power. Personal income may have been up solidly, but wages and salaries rose more modestly.<\/em><\/strong> Income gains are being bolstered by large increases in dividends.<\/em><\/strong>\u00c2\u00a0\u00c2\u00a0 Most middle and lower income households who receive dividends tend to get them in their retirement accounts, so it doesn\u00e2\u20ac\u2122t get spent. And there is only so much that upper-income households spend out of increased income. That is why consumption, which rose solidly in March, is not likely to soar this year.<\/p>\n

The National Association of Realtors reported that pending home sales improved modestly in March.<\/em><\/strong> Weakness in the Northeast and to a lessor extent in the West offset decent gains in the South and Midwest. Over the year, contract signing activity is down, further indicating that the housing market is not accelerating. Indeed, with mortgage rates rising, don\u00e2\u20ac\u2122t expect housing to lead the way going forward. <\/em><\/strong><\/p>\n

MARKETS AND FED POLICY IMPLICATIONS:<\/u><\/strong> Last year, former Fed Chair Yellen argued that the deceleration in inflation was due to temporary factors.<\/em><\/strong> Indeed, inflation had accelerated for two years, reaching 2.2% in February 2017 before easing back. Well, Dr. Yellen was correct in her analysis and we are nearing the high hit last year. <\/em><\/strong> Indeed, don\u00e2\u20ac\u2122t be surprised if the overall index exceeds that peak when the April or May numbers are released. And don\u00e2\u20ac\u2122t be shocked if the rate continues to slowly accelerate. So, if you are still holding onto the belief that the Fed will move only three times this year, you might want to reconsider that stance. <\/em><\/strong> That said, I don\u00e2\u20ac\u2122t expect inflation to spike. In part, that is due to the continued limited gains in wages and salaries that will restrain consumption. <\/em><\/strong>And with mortgage rates likely to continue rising, housing is not likely to pick up much steam. Thus, growth is not likely to accelerate significantly<\/em><\/strong>, unless businesses actually start investing really heavily in capital goods. So, investors are now facing a conundrum. Interest rates are likely to continue to rise through the rest of this year and into next. Meanwhile, growth should be solid but probably not robust. Will non-tax-driven earnings be able to sustain strong increases? That is a good, and critical, question.<\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: Disposable Income: +0.3%; Wages: +0.2%; Consumption: +0. 4%; Prices (Over-Year): +2.0%; Excluding Food and Energy (Over-Year): +1.9%\/ Pending Sales: +0.4% IN A NUTSHELL: \u00e2\u20ac\u0153Inflation is at the Fed\u00e2\u20ac\u2122s target level and it is likely the 2% rate will remain in the rear view mirror for quite some time.\u00e2\u20ac\u009d WHAT IT MEANS: With the … Continue reading March Personal Income, Spending and Pending Home Sales<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-1250","post","type-post","status-publish","format-standard","hentry","category-economic-indicators"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1250","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1250"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1250\/revisions"}],"predecessor-version":[{"id":1251,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1250\/revisions\/1251"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1250"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1250"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1250"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}